SECTION 76 POWERS This was the 7th of a series of proposals to the Strategic Finance Committee of Newry Mourne and Down Council in 2021. Seeking to transform the rates base of Council for the better and at no cost to the ratepayer.
This was another proposal that had already been embraced by other Councils in Ireland, England, Scotland and Wales.
HOW WE CAN RAISE CAPITAL INVESTMENT FOR VITAL LOCAL PROJECTS.
Following RPA, section 76 of the Planning Act 2011 gave Councils in Northern Ireland the power to levy developers a contribution toward local infrastructure. In Britain and RoI these powers are used for the sustainable development of an area – making sure that development does not run ahead of the capacity of the infrastructure of the area to support it.
Planning gains (or planning obligations) are ways that local authorities in the United Kingdom can secure planning gains during granting of planning permission They are used to ensure that commercially-viable development is not socially or environmentally unsustainable. Typically they fund the provision of public goods, including affordable housing, community infrastructure (such as libraries or parks or roads), or environmental safeguards.
N.I. has already had section 76 agreements in Lisburn and most recently in Ards where developers have been levied for the new road.
England.
The principle that development value should be subject to a charge or levy has been an aspect of English planning for decades. Local Planning Authorities’ (LPAs) ability to negotiate obligatory contributions is provided under section 106 of the 1990 Town and Country Planning Act. These negotiated agreements are known by the vernacular, ‘section 106 agreements’. Levies can be created for affordable housing, roads and even public art.
Watch a UTube summary here https://www.youtube.com/watch?v=EubIsLhnzKY&t=17s
Scotland
In Scotland the equivalent is a Section 75 planning obligation under the Town and Country Planning (Scotland) Act 1997. They can include financial contributions towards schools, roads, transport, public realm and affordable housing.
Republic of Ireland.
Development contributions are dealt with under Sections 48 and 49 of Part III of the Planning and Development Act 2000. Contributions to ‘public goods’ are extensive in the Republic, developer levies are higher and cover a wider scope than in the UK.
Comparisons published by Stormont Research Department
A clear comparison between England, Scotland, Wales and Northern Ireland can be found on page 34 of this report from the Northern Ireland Assembly. Note that since RPA, section 76 powers is now in the hands of Councils across N.Ireland. http://www.niassembly.gov.uk/globalassets/documents/raise/publications/2016/environment/1316.pdf Link to actual legislation here; https://www.legislation.gov.uk/nia/2011/25/section/76
EXPANDING NEWRY MOURNE AND DOWN COUNCIL DISTRICT RATES BASE & INCOME WITH SECTION 76
The example below is a real-world example in the Downpatrick local electoral area. Similar examples could be found in every local electoral area.
However only in Downpatrick has the Council been specifically told by the Permanent Secretary of the Department of Infrastructure that we should use our Section 76 powers on a particular project. Despite clear minuted direction from Councillors, management has done nothing about it to date.
Up to the point I wrote this paper in 2021, failure to act on a properly-passed Council motion had so far cost Council up to ~£1,632,000. This figure would be far higher now. See details following;
REAL-WORLD EXAMPLE OF HOW THIS WORKS
When DfI Permanent Secretary Peter May met Council management and local councillors on 9th March 2018, he presented a report on Downpatrick’s ‘Distributor Road’ or ring-road which according to the current Ards and Down Area Plan is supposed to connect the hospital and Council Campus to the Belfast Road. The report was commissioned by Chris Hazzard MP when he was Minister.
The road is also a component of the Downpatrick Master Plan. A new bridge links Finnebrouge and Rathkeltair roads to bypass the Strangford, Saul and Ballyhornan roads to link up with the only section of the distributor road so far completed outside the hospital on the Ardglass Road.
This would support the ~3,200 potential housing equivalent units based on land zoned under the current area plan and help traffic avoid the medieval roads network at the centre of the town. Properties in this better-off ‘commuter belt’ in Downpatrick have a rateable value of up to £2000pa. If we assume only £1600, then ~3200 units would increase Council’s rates base by £5.12 million pa at current day prices when built out.
The Permanent Secretary had a very clear message in the report. It was a “chicken-or-egg” scenario. At a cost of £17 million, the distributor road did not meet Roads Service economic criteria based on current traffic – but would meet economic criteria when the ~3200 equivalent units were built. It is difficult to see how these units can be built out without a road.
As you can see below – the Permanent Secretary was crystal clear as to how this road could be brought forward by Council – using a Section 76 Order in the Downpatrick area. If Council fund 1/3rd, ½ or even 2/3rds of this road with Section 76, it would be built.
The levy figure per unit being discussed in the Downpatrick area was £4000 per unit. This gives Council an hypothecated capital reserve fund of somewhere between £12 and £13 million pounds, plus an annual increase in rateable value of over £5 million pounds. And a massive improvement to the quality of life for people working and living in East Down and people in all the villages living around Downpatrick.
This is a rock-solid business case – WHAT HAS BEEN THE COST OF DOING NOTHING ON SECTION 76?
Before I summitted this proposal to the Strategic Finance Committee in 2021, I asked the planning department to list for me the number of units given planning permission since the Area Plan was published for the geographic area referred to by DfI Permanent Secretary Peter May in his study of the Eastern Distributor Road. I use these for illustration. Based on these figures we would already have a special capital reserve between £800,000 and £1,632,000. Instead, we have sat on our hands and do not have the investment we need for the Downpatrick DEA. Nor any prospect of getting it. Clearly 2 years later these losses are far higher.
SO WHAT HAPPENED??
This proposal got off to a great start after the meeting with the Permanent Secretary.
I got lucky with Councillor Willie Clarke of Sinn Féin chairing the next meeting of Council – see extracts from Council meeting inserted to this post.
Willie Clarke has a good grasp of Sustainable Development and Sheparded all Councillors to unanimously support my motion requiring management to bring forward a Section 76 Order of the Downpatrick Eastern Distributor Road.
He opened the discussion and chaired the meeting well. His supportive attitude resulted in the following extract in the councils minutes. However, 5 years after this motion was passed, Council management have not come back with the agreed section 76 order. As with other motions highlighted in this COP28 series, it begs the question about who runs our Council, management or the elected members?
WHAT I SAID TO COUNCILLORS AT THE MEETING TO AGREE MOTION
The current Council model of lumbering the ratepayer with multi-year rates hikes to fund huge borrowing projects is unsustainable. Retail business is losing the battle with on-line retailers and our High Streets need lower rates, not higher. Northern Ireland is one of the poorest regions in the UK and thus one of the poorest in Europe. See https://tinyurl.com/yx8sa52j
Our ratepayers cannot afford to fund financially unsustainable Council borrowing. Our current mode of thinking also has unintended consequences. The ‘we can only afford to borrow so much’ mantra results in hard choices forced through by those best able to muster political clout. Thus, Newry can have a £20 million+ scheme funded ratepayer borrowing, but Council management abandon the Downpatrick Masterplan, sell off the land bank in Downpatrick town centre and ignore necessary agreed action on the essential Downpatrick distributor road.
If we think rationally like our fellow Councillors do in England, Scotland, Wales and RoI we would quickly realise that every DEA could have self-funding Section 76 projects. Development would never get too far ahead of the ‘public goods’ or infrastructure necessary to support them. One part of a Council area would not drain all the borrowing capacity of Council to the disadvantage of other areas.
DEA Councillors could sit down with planners and agree the planning levy for a given geographical area based on the greatest infrastructure needs for that DEA. Ideally, Council-funded long-term Masterplans allow us to fund a suite of projects in a given DEA that have been signed off by all parties in Council. Down Council published long-term Masterplans for all major areas including Newcastle and Ballynahinch amongst others. We could do the same for all the major centres in Newry and Mourne and use them to advise our Area Plan priorities.
One of the side benefits of this best-practice approach is that our Council would quickly accumulate a series of special reserve funds in the manner of British Councils and could even ‘borrow’ off itself thereby reducing overall borrowing costs. At the moment we borrow from British Councils as this is the cheapest source of finance.